e. napp economic growth in this lesson, students will be able to identify factors which lead to...
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E. Napp
Economic Growth In this lesson, students will be able to identify factors which lead to macroeconomic growth.
Students will be able to identify and/or define the following terms:
Real GDP per capita
Capital Deepening
Savings Rate
Technological Progress
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E. Napp
Our world’s population has increased greatly inthe last 200 years.
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E. Napp
Population and the Economy
• A nation’s population tends to grow.
• Gross Domestic Product must keep up with the population growth rate.
• If the economy does not continue to grow as population grows, unemployment and hunger will increase.
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E. Napp
The economy is like a pie. The bigger thepie, the more people can be fed.
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E. Napp
Real GDP Per Capita
• It is important to remember that real GDP is GDP that has been adjusted for inflation.
• Per capita means per person.
• Therefore, real GDP per capita is a way of determining how much money each person in a society would receive if wealth from GDP was divided equally among the people of that nation.
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E. Napp
A country with a high standard of living hasa high real GDP per capita.
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E. Napp
Capital Deepening
• One way to increase economic productivity is through capital deepening.
• Capital deepening is the process of increasing the amount of capital per worker.
• Better educated workers can produce more output per hour of work.
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E. Napp
Better educated workers are more productiveworkers. Education helps the economy to grow.
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E. Napp
Savings Rate
• Money that is saved is available for investment.
• The savings rate is the portion of disposable income spent to the portion of disposable income saved.
• A country with a higher savings rate will be more likely to experience economic growth because more money will be available to invest in businesses.
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E. Napp
The more money citizens of a countrysave, the more money is available
for businesses to expand.
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E. Napp
When education rates and savings ratesincrease, the economy grows. And
when the economy grows, people havejobs, shelter, food, and the comforts of life.
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E. Napp
Technological Progress
• Another key source of economic growth is technological progress.
• This is an increase in efficiency gained by producing more output.
• Email replacing slower “snail mail” is an example of technological progress.
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E. Napp
Technological progress like email greatlyincreases business efficiency. Greater
efficiency means greater profits.
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E. Napp
Questions for Reflection:
• Why must the economy continue to grow as population increases?
• Why is it important for economists to calculate real GDP per capita?
• What is capital deepening and how does it affect economic growth?
• How does the savings rate help the economy to grow?
• Why is technological progress important?